Shariah screening
Why can two halal funds hold different companies?
Reasons why different Shariah-screened funds may include different companies despite similar goals.
The short answer
Funds can differ because they use different benchmarks, screening dates, thresholds, permitted income definitions and Shariah boards. Some apply stricter filters, others accept more companies based on differing methodology or data timing.
Common reasons for divergence
Differences in acceptable business lines, dates used for financial statements, how to treat mixed-activity companies and whether a vendor provides the screening all lead to variation.
Shariah-compliance considerations
Our platform uses AAOIFI Shari'ah Standard No. 21 as a practical default benchmark for shares. In common application we use: acceptable core business; non-permissible income below 5% of total income; interest-bearing debt no more than 30% of market value; and interest-bearing cash/securities no more than 30% of market value. Provider data dates and calculation conventions can differ, which explains much of the variation between funds.
What this means in practice
- 1Compare the funds’ published Shariah methodology and screening thresholds.
- 2Check the screening date and how often each fund updates holdings.
- 3Look at sample holdings and the fund’s Shariah advisory structure.